The meteoric rise of private debt

Since Private Debt Investor launched a decade ago, we have closely tracked fundraising for the asset class across its evolving array of strategies. We have witnessed the meteoric rise of an asset class that was considered a small, niche proposition in the 2000s into a major offering that has attracted many of the biggest private markets firms and institutional investors in the world. 

The past decade of private debt fundraising shows an industry reaching maturity. Fundraising has proven to be resilient through several years of difficult macroeconomic conditions, the number of active managers in the asset class appears to have settled, and big brand names have become established. 

The future also looks bright. With other sources of financing, such as banks, continuing to suffer from volatile market cycles, the business world will continue to look to alternative lenders as a stable source of financing to drive the economy.

Here we take a closer look at how the decade’s fundraising trends reflect on the growth of the asset class. 

A proliferation of new fund managers

A closer look at how fundraising has evolved in the past 10 years reveals two distinct eras

Back in 2012, closed-ended private debt funds secured just $101.6 billion of capital from LPs. This rapidly increased to reach $279.5 billion in 2017, often seen as a landmark year for the asset class. This was driven primarily by a large proliferation of new fund managers, and the number of funds closed increased every year between 2013, when 289 vehicles closed, to 480 fund closes by 2019.

But the second half of the decade has been different. The amount of capital raised has become choppier, dipping to $205.1 billion in 2020 as the covid-19 pandemic disrupted the fundraising process for many managers, and reaching a new peak the following year with €289.4 billion raised. The number of fund closes also began to decline sharply after 2019. Just 257 funds closed in 2022, down by almost 50 percent from its peak.

Carving out a name

The story of private debt in the latter half of the decade has very much been about the big fund managers getting bigger

The 10 largest fundraisers of the past 10 years have raised more than $600 billion between them. Three funds raised breached the $10 billion mark, with the other top fund closes each raising more than €5 billion. Among the top names in private debt we see many that are already familiar in the private equity world, including Blackstone, Goldman Sachs and Apollo, but also firms that have carved a name for themselves focusing on the debt space, such as Ares Management, Intermediate Capital Group and Oaktree Capital Management. 

The rapid advance in average fund size

Increasing concentration of fundraising among the top managers and decreasing vehicle launches means the average fund size has also increased, particularly in recent years

While average fund size was typically around $500 million between 2012 and 2020 (with a notable exception in 2017), 2021 and 2022 have seen this advance rapidly to $856 million and $964 million, respectively.

The US reasserts itself

North America has long been the most developed market for private credit and was a significant player before the global financial crisis

Even today, much more capital is raised for North American vehicles than European vehicles. 

Particularly since the covid-19 crisis the US has been able to reassert itself, while Europe has struggled during a period of sluggish economic growth marked
by an energy crisis and the war in Ukraine. The data also reveals that beyond the West, private credit has yet to take off. Activity is fairly low in the Asia-Pacific region, and it is virtually unheard of in the developing world.